Trucking: Where the Rubber Meets the Road

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The trucking industry today is on the upswing after a deep and difficult shakeout following the 2000 recession. The surviving carriers are enjoying higher profits and a rising demand for their services. But to remain in business over the long haul, trucking firms must continue to innovate to meet the persistent challenges of driver shortages and rising costs.

You'd think Frankie Willis would be jumping for joy. The president of Trucks Inc., a Jackson, Ga.-based trucking firm that operates 320 tractor-trailers, Willis is turning away business every day. Like truckers across the nation, Trucks Inc. is so busy hauling goods for retailers, manufacturers, and other customers that the firm has too few trucks and drivers to meet the surging demand.

"In the last four months, every customer I've had has called saying, 'Can you handle this?'" Willis said. Some strippers--the trucking firms' customers--are even paying higher rates to secure space on trucks in the traditionally busy fall shipping season, industry executives and analysts report.

From all indications, trucking firms have rarely been busier. Analysts at the securities firm Morgan Stanley reported this summer that as of late spring trucking was experiencing "some of the best industry fundamentals in 20 years." Trucking concerns, Morgan Stanley said, have been able to selectively raise rates and pass along much of their rising fuel costs to customers through surcharges. Indeed, the Bureau of Labor Statistics' producer price index shows that prices rose in each month of 2004 through July in the long-distance freight trucking industry.

Truckers try to keep "shiny side up"

Trucking firms in turn are widening their traditionally paper-thin profit margins. Bob Costello, chief economist for the American Trucking Associations (ATA), said multiple carriers have reported to him that they are making more money in 2004 than in any year in the past 20.

Still, thorny issues remain, among them a persistent driver shortage, ever-rising costs, and pricier but less fuel-efficient engines mandated by federal environmental standards. (The engines emit less pollution but burn more fuel. According to industry experts, devices that limit emissions, like the engines themselves, also burn diesel, thus using more total fuel.)

Thus in a business with literally an array of moving parts, good times can seem fraught with peril. It's this thought that keeps Willis from celebrating too much. Even the current trucking resurgence was born, in part, of a brutal shakeout that eliminated large chunks of the industry's capacity, helping create an imbalance between supply and demand. A confluence of recession, high fuel prices, and soaring instance premiums from 2000 through early 2003 killed some 12,000 trucking companies, according to Costello, and that number doesn't count potentially tens of thousands of failures among outfits with fewer than five trucks. …

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